Home › Forums › Letters of Credit

Is this contradiction

9 replies [Last post]
Mon, 02/04/2008 - 03:06
ghubshawi
Offline
Joined: 11/17/2007
Posts:
Printer-friendly versionPDF version

Dear All,

UCP600, Article 12(a) states;

Unless a nominated bank is the confirming bank, an authorization to honour or negotiate does not impose any obligation on that nominated bank to honour or negotiate, except when expressly agreed to by that nominated bank and so communicated to the beneficiary.

As far as I unerstand form the above that the nominated bank will be obliged to honour or negotiate, in case he agrees and so communcates to the beneficiary.

Do not you think the above is in contradiction with Articles 7(a) ii to v, 8(b) to (e), 9(a) & 12(c).

Please clarify

Best,

Ghubshawi 

‹ address of consignee Maturity Date, Shipment Date ›
Top
Mon, 02/04/2008 - 23:53
#1
nhduc.dng
Offline
Joined: 06/14/2007
Posts:
Contradict or not ?

Dear Ghubshawi,

A nominated bank may be a nominated non-confirming bank or a nominated confirming bank.

A nominated non-confirming bank is not obliged to honour or negotiate unless it agrees to honour or negotiate and so communicates to the beneficiary.

A nominated confirming bank once adding its confirmation is obliged to honour or negotiate (up to the case).

The above is explained in accordance with the spirit of Article 12 (a), which you seem to have understood very well..

I do not think the provision in Article 12 (a) is in contradiction with Article 7 (a) ii to v, 8 (b) to (e), 9 (a) and 12 (c). 

Article 7 (a) ii to v  refer to the issuing bank’s obligation to honour the complying documents which have been  presented to and not honoured or negotiated by the nominated bank.

Artilce 8 (b) to (e) refer to the confirming bank’s obligation to honour or negotiate the complying documents which have been  presented to and not honoured or negotiated by another nominated bank. (LC may be issued by Bank A, confirmed by Bank B and to be available with Bank C. Bank C is understood as another nominated bank).

Article 9 (a) refers to the advising bank’s obligation to advise LC or its amendment at the request of the issuing bank. If the advising bank is not a confirming bank it advises the LC or its amendment without undertaking to honour or negotiate. Please also note that an advising bank may or may not be a nominated bank:

-   If the LC is available with any bank, the advising bank may be  a nominated bank.

-  If the LC is available restrictedly with the advising bank, the advising bank is a nominated bank. 

- If the LC is available restrictedly with a name nominated bank other than the advising bank, the advising bank is not a nominated bank under the LC.

Article 12 (c) refers to the examination and forwarding of the documents by a nominated bank that is not confirming bank. This nominated bank is not liable to honour or negotiate the documents. And the action of examining and forwarding the documents by this nominated bank should not be understood as an action of honour or negotiation. Please read these above articles more carefully you’ll see they are not in contradiction with Article 12 (a) at all. 

Best regards

Nguyen Huu Duc

Top
Thu, 02/07/2008 - 17:47
#2
Frammi
Offline
Joined: 08/17/2007
Posts:
Dear Huu Duc

I fully agree with what you have explained with so much passion, but considering Art. 12 on the one hand and art 14 and especially 16 i) on the other hand, don't you agree that they are somewhat contracdictory/misleading?

If the nominated bank would bear no obligation to honour (Art 12 c)), why must it check the docs and give advice of refusal within 5 banking days?

I think the only way this can make sense is that Art. 12 c means " the nominated bank bears no credit risk for the issuing bank".

-Each long journey starts with a small step-

Best regards

Frammi

Top
Sun, 02/10/2008 - 09:25
#3
nhduc.dng
Offline
Joined: 06/14/2007
Posts:
Dear Frammi

Dear Frammi,

I am sorry but now I have to withdraw my last posting in reply to your comment as it seemed not good enough. 

Please disregard it if you have read it.

Once again sorry for any inconvenience caused. 

      Best regards,

      Nguyen Huu Duc

Top
Mon, 02/11/2008 - 14:56
#4
Frammi
Offline
Joined: 08/17/2007
Posts:
That was not my intention Huu Duc!

I like you comment which is 100% correct and completely directed to the question posed by Ghubshavi.

Somehow, I feel it would be good to extend the question by another aspect. And your opinion on that topic would be most interesting to all of us and also Armagedo's, pan's, Scottie's... whoever wants to contribute is most welcomed to do so!

-Each long journey starts with a small step-

Best regards

Frammi

Top
Sun, 02/10/2008 - 13:28
#5
John_Ferguson
Offline
Joined: 12/28/2007
Posts:
My respect!

Nguyen Huu Duc,

I am sure this posting was a tough one to write – but it is surely to your benefit that you did. 

My respect! 

Scottie 

Ps. and just for the record: Your last posting was good enough for me! As far as I can see I would agree with you 100%

Top
Sun, 02/10/2008 - 23:16
#6
nhduc.dng
Offline
Joined: 06/14/2007
Posts:
Dear Scottie,

Many thanks for your compliment. Truly appreciated.

Best regards,

Nguyen Huu Duc

Top
Thu, 02/07/2008 - 00:19
#7
ghubshawi
Offline
Joined: 11/17/2007
Posts:
Hi Nguyen

Hi Nguyen,

For easy reference I copied a part of your wording and I put between (....) below;

(A nominated non-confirming bank is not obliged to honour or negotiate unless it agrees to honour or negotiate and so communicates to the beneficiary.)

The confusion is still stand as the above statement implies that the nominated bank will be obliged to honour or negotiate in case he agrees and so communicates, in fact, this is incorrect, as the nominated non confirming bank, in any event, not bound to honour or negotiate even he agrees and communicates to beneficiary.

Then, in my eye, the context of a article 12(a) should be;

Except as otherwise stipulated in Article(......) unless a nominated bank is the confirming bank, an authorization to honour or negotiate does not impose any obligation on that nominated bank to honour or negotiate.

In the place of (.....) we can put the reference of related articles.

Please correct me if I'm wrong.

Best,

Ghubshawi 

Top
Thu, 02/07/2008 - 01:16
#8
Armagedo
Offline
Joined: 09/10/2007
Posts:
Dear Ghubshawi! I think

Dear Ghubshawi!

I think that your last is going out of UCP and coming into relations between banks and clients.

And I would think twice whether to proceed working with such a bank, if from one side the nominated bank would "agree to honour or negotiate and so communicate to the beneficiary" and from other side "it not bound to honour or negotiate even he agrees and communicates to beneficiary".

Good luck

Top
Mon, 02/04/2008 - 04:59
#9
nesar
Offline
Joined: 11/27/2007
Posts:
Is this contradiction

Dear Sir,

In order to accept nomination of the issuing Bank under deferred or acceptance credit, nominated bank has to perform two function: such as:

under deferred payment:

1. provides deferred payment undertaking and

2. pay at maturity.

under acceptance credit:

1. aceptance of draft

2. pay at maturity.

so merely giving DPU or acceptance draft doesn't ensure that nominated bank accept the nomination of the issuing bank. thats why article  7 (a) (ii-v) and 8((1)(b-d) wording this way.

hope this will help you.

thanks

nesar

Top